The Pennant Group (Nasdaq: PNTG) is expanding its leadership team, as its total blended portfolio continues to perform strongly in the face of operational challenges presented by Covid-19.
The Eagle, Idaho-based company recently named Brent Guerisoli president, effective on January 1, 2021. He currently serves in the same capacity for Cornerstone Healthcare, Pennant’s home health care and hospice segment, which is experiencing significant growth throughout the pandemic, CEO Danny Walker said on a call Wednesday to discuss the company’s Q3 2020 earnings.
Pennant reported $98.4 million in revenue in the quarter, a $10 million, or 11.3%, increase over the previous year.
Pennant’s senior housing segment, consisting of 54 communities in seven states, reported $34 million in third quarter revenue. This marks a slight increase over the previous year at 2.4%. Occupancy declined to 76.8%. This marks a 370 basis point drop from the first quarter. However, after reaching a low point in August, occupancy improved 40 basis points.
“[Pennant] continues to outperform peers in spite of industry-wide pressures on senior living, with potential residents delaying decisions and current independent living residents moving out,” RBC Capital Markets Analyst Frank Morgan wrote in a note to investors.
Walker attributed the earnings to its local leaders finding ways to move operations forward and respond to market dynamics despite continued headwinds from the pandemic. Additionally, Pennant’s senior housing portfolio was assembled at a significantly lower cost basis, compared to industry averages.
“These two factors will help us weather this current storm and drive significant long term shareholder value over time,” Walker said.
He sees a window of opportunity to continue improving occupancy moving forward, despite community restrictions preventing in-person tours. The industry has adjusted to the pandemic since the first wave of positive coronavirus cases began in the spring, and community leaders are more confident communicating with residents’ families how they are keeping their loved ones safe. And this will prove beneficial as the country grapples with a new wave of positive cases.
“We feel a lot more confident in our ability to work through this next surge than we were even at the beginning,” he said.
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Pennant Group’s home health and hospice arm, consisting of 67 agencies in 13 states, continues to propel the company’s performance. The segment accounted for the majority of revenue with $68.4 million — a 16.7% increase year over year.
The company reported 6,771 total home health admissions in the third quarter, an increase of 28.8% sequentially and 21.9% over the previous year. Total home health Medicare admissions were 3,418, an increase of 39% sequentially and 31.4%, year over year.
Hospice average daily census was 2,177, a 21.8% jump over the past 12 months, and hospice total admissions were 2,133, a 25.4% increase over the previous year. These numbers exceed pre-pandemic levels, and the average hospice census is a record. Home health and hospice demand has grown during the pandemic, as seniors hold off transitioning to senior living out of concerns of contracting the virus as well as fears of being isolated from loved ones while communities are restricted to essential personnel only.
The adjusted earnings results do not include any CARES Act provider relief funds. The company has received approximately $28 million in advance Medicare payments to date, which it expects to start repaying in April 2021. In addition, Pennant Group received approximately $5.3 million from the CARES Act payroll tax deferral program.
Walker credited Pennant’s local leadership model with providing the foundation for its continued strong earnings. The concept involves clusters of four-to-six community leaders in a given market, who share best practices and operational efficiencies, supported by a service center of shared resources and state of the art systems. Leaders are incentivized based on individual community performance, as well as cross-incentivized at the cluster level, Pennant CFO Jenn Freeman told Senior Housing News in June.
The local leadership clusters are also encouraged to identify acquisition opportunities in a market, and mentor future leaders to operate their own communities when an opening is presented.
“The strong results in the face of these many challenges exemplify the resilience of our local leadership model, and our ability to drive long term value in both segments for the benefit of our stakeholders and the communities we serve,” Walker said.
The earnings led Pennant to adjust its 2020 earnings guidance to a range of $0.75 to $0.80 per share. The company also announced 2021 annual revenue guidance of $430 million to $440 million and annual adjusted earnings guidance of $0.89 to $0.99 per share, the midpoints of which represent increases of 14.2% and 21.3%, respectively, over its revised 2020 annual guidance.
Pennant Group stock ended trading Wednesday relatively unchanged, at $46.35 per share.